US PRESIDENT Joe Biden violated the Constitution by blocking Nippon Steel’s US$14.9 billion bid for US Steel through a sham national security review, the companies alleged in a lawsuit they said was filed on Monday (Jan 6).
The companies want the federal court to scrap Biden’s decision to scuttle the deal so they can secure another shot at approval through a fresh national security review unfettered by political influence.
The lawsuit alleges Biden prejudiced the decision of the Committee on Foreign Investment in the US which scrutinises foreign investments for national security risks, and violated the companies’ right to a fair review.
The merger had become highly-politicised ahead of the November US presidential election, with both Democrat Biden and Republican President-elect Donald Trump pledging to kill it as they wooed voters in the swing state of Pennsylvania where US Steel is headquartered. United Steelworkers union president David McCall opposed the tie-up.
Trump and Biden both asserted the company should remain American-owned even after the Japanese firm offered to move its US headquarters to Pittsburgh, where the US steelmaker is based, and promised to honour all agreements in place between US Steel and the USW.
Biden sought to kill the deal to “curry favour with the USW leadership in Pennsylvania in his bid for reelection,” the companies allege.
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“As a result of President Biden’s undue influence to advance his political agenda, the Committee on Foreign Investment in the US failed to conduct a good faith, national security-focused regulatory review process,” the companies said in a statement announcing the litigation.
A White House spokesperson said “A committee of national security and trade experts determined this acquisition would create risk for American national security. President Biden will never hesitate to protect the security of this nation, its infrastructure, and the resilience of its supply chains.”
Trump, in a post on his social media platform said “Why would they want to sell US Steel now when Tariffs will make it a much more profitable and valuable company?”
The lawsuit, which echoes claims the companies made in a Dec 17 letter to CFIUS obtained by Reuters, shows the companies are making good on their threats of litigation and will continue to fight to get the deal approved.
“We can’t back down after being treated unreasonably. We will fight back thoroughly,” Nippon Steel vice-chairman Takahiro Mori told Nikkei in an interview on Monday.
Mori said the CFIUS review process lacked integrity as the Japanese company received no written feedback on the proposed national security agreement it voluntarily presented, and there were no questions or concerns expressed by CFIUS during its multiple meetings, Nikkei said.
The prospects are unclear for the lawsuit, which also targets Attorney General Merrick Garland and Treasury Secretary Janet Yellen, who oversees CFIUS. Courts generally give great deference to CFIUS to define national security, experts say.
The companies also filed a second lawsuit against rival bidder Cleveland-Cliffs, its CEO Lourenco Goncalves, and USW union president David McCall “for their illegal and coordinated actions” aimed at preventing the deal.
They argue Cliffs, Goncalves and McCall colluded in an “illegal campaign” to allow Cliffs to “monopolise the domestic steel markets” by thwarting any other attempts to buy US Steel.
Goncalves participated in at least nine calls assuring investors that Biden would scuttle the Nippon Steel merger, according last month’s letter to CFIUS, Reuters reported on Sunday.
The companies are seeking an injunction against further “anticompetitive” behaviour as well as billions of US dollars in damages.
McCall said the USW was reviewing the complaint and would “vigorously defend against these baseless allegations”. The Justice Department and Treasury Department, and Cleveland also did not immediately respond to requests for comment.
Last week, Biden blocked the proposed purchase on national security concerns, dealing a potentially fatal blow to the contentious plan after a year of review.
US Steel, founded in 1901 by some of the biggest US magnates, including Andrew Carnegie, JPMorgan and Charles Schwab, became intertwined with the industrial recovery following the Great Depression and World War Two.
The company has been under pressure following several quarters of falling revenue and profit, making it an attractive takeover target for rivals looking to expand their US market share. REUTERS